Glossary

underlying value

The estimated worth of the company based on its long-term fundamentals, rather than short-term market sentiment.

Holding company

A holding company is a company that owns a controlling interest in one or more other companies, usually referred to as subsidiaries. It typically does not produce goods or services itself but exists to own shares of other companies, allowing it to control or influence their operations. In investment terms, holding companies are often valued […]

SONIA

SONIA is the abbreviation for the Bank Of England’s Sterling Overnight Index Average and was first introduced in March 1997. SONIA is a widely used interest rate benchmark and the reference rate for sterling Overnight Indexed Swaps (OIS). The Bank of England became its administrator in April 2016, and introduced a series of reforms of the benchmark in April […]

EPRA Earnings per share or EPRA EPS

EPRA Earnings per share or EPRA EPS – EPRA Earnings is a measure of the underlying operating performance of an investment property company excluding fair value gains, investment property disposals and limited other items that are not considered to be part of the core activity of an investment property company. EPRA earnings per share are […]

Bobl, bund and schatz

Bobl Bobl is an acronym for bundesobligationen – debt issued by the German government. The acronym crops up in a futures contract used to trade medium-term German debt. The contract has a notional value of €100,000. On the Eurex exchange euro-bobl futures contracts exist for the months of March, June, September and December. The underlying […]

Tail Hedging or Tail Hedge

Tail Hedging Funds are designed to benefit when extreme events occur. So-called Black Swan events (named after Australia’s Black Swans, an animal so alien to European minds that its existence couldn’t be foretold) could impact the value of all assets (when assets fall or rise in tandem they are said to be positively correlated). Tail […]

Protection strategies

Some hedge fund strategies are designed to make money when other assets are falling in value. Collectively these can be referred to as protection strategies. The simplest of these is a net short equity or credit fund but other types exit including Negative Correlation funds that seek out investments that benefit when certain asset prices […]

Volatility Arbitrage

Volatility Arbitrage funds try to make money by exploiting changes in the volatility (how far the value of something moves up and down over a period of time) of an asset. One way of doing this is to construct a delta neutral portfolio by selling / buying an underlying security and buying / selling an […]

Derivative

Derivative refers to a security whose value depends on the value of another asset. For example a warrant is a derivative based on the value of the equity that the warrant can be used to buy. Derivatives can be used to get exposure to the underlying asset without having to put up all of the cost […]

Premium

The amount by which the share price exceeds the net asset value, calculated as the share price divided by the net asset value and expressed as a percentage. The share price of an investment trust can differ from the net asset value (NAV). If the current share price is above the NAV, the investment trust […]

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Glossary

underlying value